Mark Newman

Mark Newman asked about Seagate's supply-demand balance, plans for adding capacity, potential supply chain bottlenecks, and the adoption trajectory of HAMR technology, including any upside or downside to previous projections.

Answer

Dave Mosley, Chair and CEO, explained that Seagate's strategy for adding capacity focuses on increasing exabyte capacity through product transitions to higher-capacity HAMR drives, rather than adding unit capacity. Gianluca Romano, CFO, added that five global CSPs are now qualified on HAMR, contributing to better-than-expected revenue and profitability, and the HAMR ramp continues as planned.

Mark Newman asked about Seagate's plans to add capacity given tight supply and the adoption of HAMR technology, including any upside or downside to previous HAMR rollout projections.

Answer

Seagate's Chair and CEO, Dave Mosley, explained that capacity additions focus on product transitions to higher exabyte drives rather than unit capacity. CFO Gianluca Romano added that the qualification of five major cloud customers on HAMR is accelerating profitability, exceeding initial expectations.

Mark Newman requested clarity on the breakdown between Software and Consulting for IBM's growing AI book of business, noting it was previously around 80/20. He also asked for an explanation regarding Consulting's book-to-bill ratio being below one for two consecutive quarters, despite a trailing 12-month ratio above one, and why this shouldn't be a concern, especially with 30% of signings being longer-duration AI projects.

Answer

Jim Kavanaugh, IBM's Senior Vice President and Chief Financial Officer, addressed the Consulting book-to-bill, noting that while signings were down 5% due to lower large deal renewal volume, the quality of signings improved significantly with double-digit net new business penetration and over 300 new clients year-to-date. He highlighted that GenAI, comprising 22% of backlog, 30% of signings, and 12% of revenue, is inflecting growth, leading to confidence in Q4 Consulting growth and a return to market growth levels in 2026. Regarding the AI book of business breakdown, Mr. Kavanaugh stated that of the over $9.5 billion total, over $7.5 billion is in Consulting and almost $2 billion in Software, remaining 'pretty damn close to that 20/80 overall.' He also provided an update on Red Hat's performance, noting 12% growth in the quarter, with OpenShift bookings up nearly 40% and Ansible bookings up 20%, despite headwinds from consumption-based services and RHEL reverting to its model.

Mark Newman, Managing Director and Senior Analyst at Bernstein, requested a specific breakdown of IBM's $9.5 billion AI book of business between software and consulting, noting a previous 80-20 split. He also expressed concern about consulting's book-to-bill ratio being below one for two consecutive quarters, asking for an explanation and reassurance, especially given that AI signings, which are believed to be longer duration, constitute around 30% of signings.

Answer

Jim Kavanaugh, IBM's Senior Vice President and Chief Financial Officer, clarified that the generative AI book of business is over $9.5 billion, with over $7.5 billion in consulting and almost $2 billion in software, maintaining a composition close to the 80/20 split. Regarding consulting, Kavanaugh acknowledged that signings were down 5% for the quarter, driven by lower large deal renewal volume, which he argued has less revenue realization. He emphasized the "quality of signings," noting tremendous improvement in net new business penetration (double-digit year-over-year) and over 300 new clients year-to-date. He highlighted that the backlog of $31 billion is healthy, growing 4%, with the best erosion in years, indicating strong client commitment. Kavanaugh stated that GenAI, constituting over 22% of backlog, 30% of signings, and 12% of revenue, is inflecting growth, leading to confidence in consulting growth in Q4 and returning to market levels in 2026. He also provided detailed insights into Red Hat's performance, noting 12% growth, with OpenShift bookings up nearly 40% and ARR up mid-30s, and Ansible bookings up 20%, expecting solid double-digit growth for Red Hat in Q4 and acceleration into 2026.